Krugman on Bargaining

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by John Goodman,

from NCPA,

Paul Krugman says that in a weak economy workers have weak bargaining power. In his opinion, that’s bad for workers, but good for their employers. He writes:

Now think about what this means for workers’ bargaining power. When the economy is strong, workers are empowered. They can leave if they’re unhappy with the way they’re being treated and know that they can quickly find a new job if they are let go. When the economy is weak, however, workers have a very weak hand, and employers are in a position to work them harder, pay them less, or both.

As a result, he says that workers are burdened by a “fear factor” and goes so far as to label our economy “the fear economy,” implying that the workplace is somewhat akin to a police state.

Now let’s turn to reality. In his book, The Road to Freedom, Arthur Brooks summarizes a number of studies on how people feel about work:

– It turns out that the vast majority of Americans instead of living in fear of being fired actually like their jobs: 89% are either very satisfied or somewhat satisfied with their jobs.

– Satisfaction is the roughly the same, up and down the income scale.

– Further, Americans are happier when they work more hours: those who are happiest work 50 to 59 hours a week (Europeans are happiest working 35 to 39 hours).

– Only 11% of American workers say they wish they could spend a lot less time on their jobs.

As for “bargaining,” alert readers will recall it is a word that Krugman has used before, with respect to health care. A “single payer” he says would have the bargaining power to push doctors’ fees below their current levels and reduce the price patient must pay. But why is it good for doctors to live in fear, but not ordinary workers? And if the single payer bargaining is good for medicine, why wouldn’t it work just as well for college professors — given that higher education seem to have all the same problems that the health care system has. (Think how much lower Princeton tuition might be if Krugman, Uwe Reinhardt and all their colleagues had their salaries cut in half.)

Moreover, if “bargaining power” is what counts, why not have government bargain for us in every market for every product we buy?

Before I go on, pick up any introductory textbook in economics and see if you can find the word “bargaining” or the word “fear.” I bet you can’t. That’s just by way of warning you that Krugman’s depiction is not the way real economists would describe any of this.

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